The Sheraton Gunter Hotel has seen its share of celebrities over the years, but now the 102-year-old hotel is set to face the auction block next month.

Records show that the hotel's owner, Gunter Hotel Ventures, has defaulted on a $40 million note, dating back to 2007. The 322-room hotel, which sits on two parcels and includes a nearly 40,000-square-foot garage, is valued at about $30 million, according to documents provided by RexReport.com.

As of February, records show that the actual balance on the loan remained $40 million. The loan was supposed to be paid off next June. The hotel continues to operate and take reservations, and employees said they had not heard anything about the impending foreclosure. Management at the hotel did not return calls seeking comment.

The Gunter seems the latest historic downtown hotel to face such difficulties as they struggle to keep pace with the boom in new downtown hotels.

Last year, the 102-year-old St. Anthony Hotel went into receivership as its owners owed nearly $50 million on the $19 million property. The hotel's general manager, Steve Wisner, said the hotel no longer is in receivership and was purchased late last year by an ownership group made up of several different businesses.

Three new hotels have found a home along East Houston Street over the past year, with a fourth expected to come online in June at the historic Central Trust Co. building. The number of downtown hotels has jumped about 30 percent in the past decade, hurting revenues and occupancy for the historic stock.

Todd Walker, senior vice president at Source Strategies Inc., said the Gunter's occupancy rate has remained steady from 2009 to 2010 at 56 percent. In order for the historic hotels to keep pace, they need to frequently update the facilities, he said.

“With these older properties, if they're not in really good shape you need a lot of capital investment to renovate the whole building and get it in top shape to perform against a new high-end hotel,” Walker said. “If they're going after that high-end customer, there's a lot of competition at that level in downtown San Antonio.”

In 2006, the Gunter did receive a $7 million interior face-lift with new paint, carpet, furniture and accessories.

The St. Anthony's Wisner said that historic hotels aren't the only ones that need to renovate in order to stay competitive.

“We're all in the same boat,” he said. “To be competitive, you need to renovate, and that's not just for historic hotels.”

Since the change in ownership, Wisner said the hotel is seeing better revenues and occupancy numbers. Although he didn't provide exact figures, he did say that occupancy has jumped 15 percent during Spring Break this year compared to last year.

In October, the Gunter Hotel's owners advised the note's master servicer, Well Fargo Bank, that it would not make payments on the loan because of low cash flows, according to a delinquency report by Bloomberg. The owners pointed to the addition of nearby hotels as the reason the Gunter was struggling financially. The loan then was transferred to a special servicer, JE Robert Companies, which got legal counsel involved a month later.

Officials for the special servicer could not be reached for comment.

Lee Bosmans, who has owned the barbershop in the hotel's basement since 1978, said he had a feeling the hotel was facing some financial difficulty but was not aware it was facing foreclosure. The barbershop has been a part of the hotel since it was built in 1909, and celebrities such as John Wayne, George Foreman and Jack Dempsey have had their hair cut at the shop.

Even though the hotel could be purchased at auction April 5, Bosmans said he's not worried about his business.

“I had a feeling something was up, but I really didn't know,” he said about the hotel's financial troubles. “But it doesn't bother me because, even if the hotel changes hands, I've always felt like I have a home here.”

Revenue for the hotel dropped 6 percent from $9.1 million in 2009 to $8.6 million last year, according to the Texas Comptroller's website. Conversely, revenues for hotels in the same ZIP code jumped 6 percent during the same period, Walker said.

Despite their struggles, Walker thinks downtown's historic hotels will always have a niche.

“There is still plenty of attraction in those older hotels, but if they're not in great shape ... people will look to go somewhere else,” he said.

Express-News Business Writer Patrick Danner contributed to this report.